Prescott Real Estate News Blog's purpose is to keep current, past, and potential clients apprised of the real estate market conditions for the Prescott, Arizona Area. National and state news and events will be posted but special emphasis will be placed on Prescott Area and the Yavapai County - Prescott, Prescott Valley, Chino Valley, Dewey and Kirkland/Skull Valley.
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Monday, August 22, 2011

Economic Roundup: August 22, 2011

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Stocks ended another wild week of volatile trading that left many Wall Street watchers wondering when the daily whipsawing would end. Once again, the market volatility was driven by a combination of the foreign debt crises; the U.S. debate on its own debt remaining somewhat unresolved; poor performance by major tech players such as Hewlett Packard and IBM; and investor trepidation over recent market losses.

Real estate was also a key newsmaker last week, with both existing home sales and construction starts for new homes showing a dip during July.

Sales of existing single-family homes, townhomes, condominiums and co-ops fell 3.5 percent to an annual rate of 4.67 million in July from 4.84 million in June, according to the National Association of REALTORS® (NAR). Last month's figures were 21 percent above July 2010's 3.86 million-unit sales figure, which was a cyclical low immediately following the expiration of the home buyer tax credit.

"Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers," said Lawrence Yun, NAR's chief economist. "Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs."

In terms of pricing, the national median existing-home price for all housing types was $174,000 in July, down 4.4 percent from July 2010. Distressed homes, such as foreclosures and short sales, accounted for 29 percent of sales in July, compared with 30 percent in June and 32 percent in July 2010. (Distressed homes are typically sold at deep discounts.)

Switching to new homes, building permits for privately owned housing units issued in July dipped to an annual rate of 597,000, according to the Census Bureau. This was 3.2 percent below June's revised rate of 617,000, but 3.8 percent above July 2010's estimate of 575,000. Notably, permits for single-family authorizations in July were at a rate of 404,000, which was a slight 0.5 percent above the revised June figure of 402,000.

Construction starts on privately owned housing for July dropped to an annual rate of 604,000, which was 15 percent below June's revised estimate of 613,000, but is 9.8 percent above the July 2010 rate of 550,000. Starts for single-family homes in July were at a rate of 425,000; this is 4.9 percent below the revised June figure of 447,000.

That said, completions of new homes were up. Construction completions of privately owned housing in July hit an annual rate of 636,000, which is 11.8 percent above the revised June estimate of 569,000, and 9.5 percent above the July 2010 rate of 581,000. Completions of single-family housing units in July were at a rate of 470,000; this is 6.1 percent above the revised June rate of 443,000.

Moving over to inflation news, the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in July, the U.S. Bureau of Labor Statistics reported last week. Over the last 12 months, prices for the "all-items" index increased 3.6 percent before seasonal adjustment.

The index for all items less food and energy increased as well, moving upward by 0.2 percent. Contributors to that gain included the shelter index, which accelerated in July, and the apparel index, which increased sharply.

In contrast, the index for new vehicles was unchanged after a long string of increases. The index for household furnishings and operations was flat in July as well, and the recreation index declined slightly.

Producer prices were also up, with the Producer Price Index for finished goods rising 0.2 percent in July, the bureau also reported. This advance followed a 0.4-percent decrease in June and a 0.2-percent rise in May. At the earlier stages of processing, prices received by manufacturers of intermediate goods moved up 0.2 percent in July, and the crude goods index declined 1.2 percent.

Claims for initial jobless benefits for the week ending August 13 reached 408,000, an increase of 9,000 from the previous week's revised figure of 399,000, the Employment and Training administration reported last week. The four-week moving average was 402,500, a decrease of 3,500 from the previous week's revised average of 406,000.

The advance number for insured unemployed workers during the week ending August 6 was 3,702,000, an increase of 7,000 from the preceding week's revised level of 3,695,000. The four-week moving average was 3,716,000, a decrease of 4,500 from the preceding week's revised average of 3,720,500. This week's slate of economic news is relatively light, starting off tomorrow with July's new home sales totals from the Census Bureau, which follows up on Wednesday with July's durable goods orders.

On Thursday, the Employment and Training Administration will release last week's initial jobless claims data. On Friday the Bureau of Economic Analysis will release the second quarter's gross domestic product, and the University of Michigan will release its consumer sentiment figures for August.